A Start-up company to start your career. Professional Development Seminar March 6, 2013

Transcription

1 A Start-up company to start your career Professional Development Seminar March 6, 2013

2 What is a start-up company? Small, just started Typically 1-5 years old Often no products, no sales Developing something totally new May, or may not be a market

3 What is a start-up company? Funding comes from different sources Venture capital funding Grants Development money from a larger company Whole company is often not well developed

4 Why work in a start-up company? Tremendous adventure You are starting something completely new Opportunity to be part of something as it grows Very strong focus Team work essential Can have good and exciting colleagues

5 What do you do in a start-up company? Everything Take out the garbage, clean the floors You do not do research You do do development All sorts of development work Solve whatever problems need solving You typically own part of the company Part of your compensation package

6 What are risks of a start-up company? Tremendous job insecurity Funding may disappear in an instant Technology, or marketing, may fail Product may be too little too late Most start-up companies do fail You work very hard for relatively little pay

7 So you want a job in a start-up Could be most exciting thing you do Tremendous focus, comraderie Tremendous challenge Tremendous fun Fantastic experience for your cv You easily find another job if you have to

8 Why start a company? Want to have real impact Requirements too large for a university lab Development needs a large team of engineers Want to have success Want to make money

9 Why start a company? Want to have real impact Requirements too large for a university lab Development needs a large team of engineers Want to have success Want to make money wrong! Only money makes money

10 Why start a company? Want to have real impact Requirements too large for a university lab Development needs a large team of engineers Want to have success Want to make money wrong! Only money makes money Founders do make money

11 Success of companies Technology push Market pull

12 Technology push New technology that is of great value Most common scenario Need to establish the market Do customers really want this? Much longer route to success

13 Market pull Technology that addresses current need Market already established Much more difficult to find Do customers really want this? Much shorter route to success

14 Success of companies Technology push Market pull Direction and focus of company almost always changes Must meet needs of the market

15 Entrepreneurship You have your idea What is next

16 Entrepreneurship You have your idea What is next Need to protect your idea

17 Intellectual property You need to protect your ideas Done through the patent process Harvard owns all IP Except for undergrads Managed by OTD

18 Why file for IP? Essential for any start-up Can not raise money without IP Harvard files IP very quickly Does not interfere with publication, talks

19 Why file for IP? Essential for any start-up Can not raise money without IP Harvard files IP very quickly Does not interfere with publication, talks BUT: filing IP costs money Roughly $100k per patent Harvard must recoup this money Must license patent difficult balance

20 Who pays for IP? IP is licensed to start-up company Harvard is not a for-profit business But still must recoup costs Harvard typically takes ~8% in equity Company also pays for patent costs, then royalty Choice of what to file is difficult Can not always get the exact balance

21 Beware of IP licensing IP is licensed to start-up company Start-ups like exclusive license in all fields Makes the company more valuable Essential for raising money Costs the company a lot of money Restricts further opportunities OTD can help with advice

22 Entrepreneurship You have your idea What is next Need business development expert Most important person to work with you Most difficult person to find

23 Entrepreneurship You have your idea What is next Need to raise money to pursue innovation

24 Cost of money Money costs you the company Investors earn money by owning the company Money comes in tranches Need to reach milestones for each tranche The more money they invest, the more they will ultimately own

25 Grants Usually too slow Your pocket Not enough Angel investors Early stage investors Sources of money

26 Sources of money Grants Usually too slow Your pocket Not enough Angel investors Early stage investors Venture capital Mid-stage investors Hedge funds, large funds Larger investors Co-development funds Retain ownership Lower risk; lower return Revenue Usually much later

27 Examples Money comes in tranches Need to reach milestones for each tranche Money costs the company Investors earn money by owning the company The more money they invest, the more they will ultimately own

28 Big problem: Valley of Death Early money Enough to establish basic concepts Very difficult to find Harvard has some sources for life sciences, not for others.

29 Angel funding Rough estimates Typically take about 30%-50% of the company Venture Capital funding Typically take about 50-70% of the company Typically save 10-15% for employees Remainder for founders: ~ 20-30%!!

30 Example: Super favorable raise Post value of the company: ~ $20 M VCs take 51% Raise ~ $10 M Enough for 1.5 years, low spending Employees get ~ 20% Founders get ~ 30% Three founders, ~10% each $ 2M!

31 Success! Successfully develop your technology But, no sales, no products, no income Need to develop the instrument, sales and marketing group

32 Series B raise Up round: Company now worth $40M But, you need $ 20 M for development Sell half the company Founder share now 5%, or $ 2M

33 Success!! You have a product You have a sales team But, you don t have income Maybe you need to change directions You probably need to raise more money Founder shares decrease each round Often diluted out completely

34 Why Raise any money? Organic growth Grants, your own funds Sweat labor Much slower to market Much less development Much slower growth Venture Capital funding Give up some (a lot!) of the company for faster growth

35 Other contributors Consultant or employee Paid in cash and in equity Consultant: Small number of shares

36 Employees Equity from employee pool Vests after some time Motivate performance, keep employees CEO: ~ 3% of the company Employees: ~ 0.1% of the company

37 Exit How VCs make money Take company public: IPO Sell to a larger company Keep running the company Often ties up employees for a year or two

38 RDT Corporate Offices 44 Hartwell Ave. Lexington MA

39 Why start Raindance Harvard-developed technology Some ideas of practical uses Technology push Development required large engineering team Engineering effort too large for academia

40 Founders: Founding RDT Dave Weitz lab at Harvard Darren Link post doc who developed technology Jerome Bibette former post doc with start-up experience; currently in Paris Andrew Griffiths pioneer in dropletbased biology; currently in Strasbourg

41 Raindance Technologies Traditional route to funding Angel funding to start Venture Capital funding Exit strategy?

42 Funding for RDT Angel funding Three years, $7.5M 15 employees No clear business strategy No management team, just engineers Product: general purpose lab-on-a-chip Angel investor took 70% Founders left with about 10-15%

43 Funding for RDT Series B investment VC funding $35 M Hired CEO Focused business Genomic selection Simplest possible instrument

44 Genomic selection For 2 nd generation sequencers Can sequence ~100 MB Use only relevant region for sequencing Library of PCR primers for these regions Mix genomic target with single primer pair PCR to amplify desired amplicon

45 Funding for RDT Series C investment VC funding $15 M Genomic selection Still long time to market Market needed validation increased time Market ultimately limited

46 Funding for RDT Series D investment VC funding $20 M Need to find next product Digital PCR Fired CEO, leadership team No vision for future

47 Funding for RDT New CEO Banker Little technical experience No management experience Could enunciate vision Exit strategy Too expensive for buy out Take the company public

48 Exit Strategy for RDT Total investment: ~$50M Additional investment ~$50M Total investment ~$100M No big-selling product yet No proven killer app Too expensive for another company to buy IPO?

49 Design of pure material for Food, Beverage, and Cosmetic

50 Capsum Different example Based on application developed in Harvard lab Encapsulation and release of actives Common for drug release

51 Founding team David Weitz Mallinckrodt Professor of Physics and of Applied Physics, Harvard University Director of Harvard's Materials Research and Engineering Center Founder of Raindance Technologies ( 18 years working experience at Exxon Research and Engineering 325 scientific papers, 30 patents Jerome Bibette Professor of Physics at Ecole de Physique et Chimie Industrielles in Paris Director Colloids and Divided Materials Laboratory at ESPCI Co-founder of Raindance Technologies in 2004 and Ademtech in 2000 Sebastien Bardon PhD in Physics and MBA from MIT Sloan School Led the early stages of the largest internal venture at Saint-Gobain (SGO) Operational experience: team and project management, R&D, setup of a plant, marketing Author of 25 patents and 16 scientific articles

52 Cosmetic : First commercial application Encapsulation of active molecules for skin-care Capsum s polymersomes Amore Pacific is the leading cosmetic company in Korea Significant reduction in bio-activity degradation after two months shelf storage

53 Sales to start Capsum Done at peak of economic downturn Professional BD person took 6 months to raise 900k

54 Capsum Organic Growth Immediate sales: Amore Pacific Market pull ~800k / yr Government grants ~1M Fund raising 800k 20 employees Moved operations to Marseilles Total burn in 2.5 years: ~ 100k Founders kept ~60% of the company

55 Commercial products

56 Commercialized products

57 Commercialized products

58 Exit for Capsum Several new products Many new products in pipeline Innovation for cosmetics Company is now a good acquisition target Exit will come in next few years

59 GnuBio High-speed sequencing Mike Weiner, John Boyce

60 GnuBio Chasing the $1000 genome Sequence full human genome in less than a day, less than $1000 Team with other IP Social network of genomic data database Technology push Pitch evolved with VC presentation

61 Selling GnuBio Became sequencing company Address the applied market Huge potential market Market pull Generate a huge amount of buzz

62 Weitz Announces the $30 Genome Confidential and Proprietary 62

63 Selling GnuBio Became sequencing company Address the applied market Huge potential market Market pull Generate a huge amount of buzz Capture the buzz and get funds First round from known investors

64 GnuBio Became sequencing company Address the applied market Huge potential market Generate a huge amount of buzz Capture the buzz and get funds First round from known investors

65 Funding for GnuBio Money in tranches First tranche of only $2.5 M Second tranche in 8 months Milestone based Second tranche was $6M Second round funding - $10M Milestones ensured less dilution

66 Exit strategy for GnuBio Sales of instruments Clear vision of instrumentation Knowledge of needs Market push Well-defined product Known market New ones identified

67 Exit strategy for GnuBio Beta instrument in 2 months First example of commercial success Should become acquisition target

68 Conclusions Why to join a start-up company Why to start a company How to start a company How to exit a start-up company Thank you for your attention